Mutual Funds Cut Uber Valuation by as Much as 15%

The Wall Street Journal reported that Vanguard, Principal, and Hartford Funds cut the value of their shares by 15% as of June 30. T. Rowe Price lowered its Uber share price by 12%. Fidelity maintained its price and peculiarly, Blackrock increased its price to $53.88.

Some major investors are finally feeling compelled to apply the scratch and dent markdown to Uber shares. Seven mutual funds own Uber shares, and more than half cut their price from the $48.77 per share price at which they’d held them since the fourth quarter of 2015, the last time Uber raised money.

Use psychological pricing methods.

Having high profile investors repudiate the valuations that venture capitalists are touting is proof that the myth of Uber’s inevitable dominance of the ride sharing business, and that that would someone lead to ginormous profits is finally getting long-overdue scrutiny. Mind you, these investors can afford to cut their valuations because they got at lower prices, some at $15.51 a share.

Needless to say, the fact that sophisticated investors are already haircutting Uber’s shares is going to put a dent in its fundraising efforts. The Journal repeated the Uber party line about its fundraising effort with SoftBank.
A negotiation of what is a simple sale of existing shares (as in the terms are already set) does not take months to negotiate. The longer talks like this go on, the less likely anything is to get done in the absence of a big development.

Yet other outlets that picked up on the story that Bloomberg broke on July 25 took up Uber’s spin, with no evidence of any input from SoftBank to justify the pro-Uber hype. The Journal’s account, following close on the heels of the Bloomberg story, and based on only US sources, was headlined SoftBank Seeks Multibillion-Dollar Stake in Uber.

Demonstrate the differences

On August 7, the Journal headline was, “SoftBank Chief Says He Wants Stake in Uber or Lyft.” And what did CEO Masayoshi Son say at a press conference? ““We are interested in discussing with Uber. We are also interested in discussing with Lyft.” That is not the normal Japanese locution for negotiations that are underway. That is basically saying SoftBank was prepared to receive an approach.

Offer a money-back guarantee

Moreover, Son said his interest is self-driving car technology. If he or his due-diligence team were to take a hard look, they would presumably figure out that Google is suing Uber for stealing its key self-driving car technology, and without that, Uber doesn’t have much of value here.

Test your offer and price, and be creative.

Since then, the reports from the Uber side as to where SoftBank stands have kept shifting, to the degree that it looks like Benchmark and its allies can’t keep their story straight. On August 14, the New York Times reported that Uber was taking the “next step” to “move forward” with a supposed proposal from SoftBank to invest in Uber.